The trade deficit in the beverage industry is increasing, but there is export potential

When thirsty, many prefer beer, water or a cold juice. For those, the Colombian beverage industry offers more and more options. Part of the challenge now is to conquer foreign markets.

Colombia’s beverage industry has not fared well in international trade, with an annual deficit of over US$450 million, according to DANE. However, the variety and quality of products give the sector a high export potential.

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The beverage industry is wide and varied

The beverage industry includes distilled beverages (including whiskey, cognac and brandy), non-distilled fermented beverages (mainly wine), malted beverages (beer stands out in this category) and non-alcoholic beverages (water, juices, soda, ice and energy drinks, among others).

Apart from the division by type of beverage, which is used in international trade, the market is segmented by other characteristics, as explained in a recent analysis of the Colombian beverage industry market by the consulting firm Informes de Expertos.

Two of the characteristics by which the beverage industry can be classified are the type of packaging, i.e., whether it is a glass bottle, plastic bottle or can, and the type of flavor (flavored and flavored or unflavored).

The beverage industry can also be divided between products aimed at the mass and wholesale trade, on the one hand, and products dedicated to the retail and specialized trade (including bars and restaurants), on the other.

Since 2019, beverages aimed at retail and specialized trade have been gaining strength in Colombia, as the sector’s strongest growth is in craft alcoholic beverages.

In the beer market, craft beverages accounted for 6% of Colombian production, according to a 2022 Fedesarrollo study.

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The trade balance for the beverage industry is negative

According to DANE, the Colombian beverage industry went from having an annual trade deficit with the rest of the world of USD $10 million, in the first years of the 21st century, to a deficit of USD $458 million in 2022.

While the average annual deficit from 2001 to 2010 was USD $36 million, the average deficit from 2011 to 2022 was USD $283 million, as can be calculated from DANE data.

Imports grow, but exports do not

The behavior of the beverage industry’s trade deficit is due to the fact that exports have remained stable over the last twenty years, while imports began to grow significantly since 2010.

In 2002, USD $29 million was exported to the rest of the world, a figure very similar to exports in 2017, fifteen years later, when exports reached USD $30 million, according to DANE.

The average annual exports of the beverage industry between 2001 and 2010 was USD $43 million. And, from 2011 to 2021, the average exported to the rest of the world was USD $42 million, which evidences a stagnation in the sector’s exports.

Imports, on the other hand, have been growing. While in the first five years of the century they did not exceed USD $50 million, in 2022 they reached USD $530 million, according to DANE. From 2001 to 2010, the annual average of imports was USD $78 million. Between 2011 and 2021, on the other hand, the average was USD $309 million.

To which destinations and what does the beverage industry export?

From 2011 to 2022, the main destinations for Colombian beverage exports have been Ecuador, with 18% of all exports in this sector; the United States, with 15%; Peru, with 13%, and Spain with a 12% share, according to DANE figures.

Panama accounted for 8% and the Dominican Republic for 7% of the beverages exported. None of the other destination countries accounted for more than 4%.

Between 2011 and 2022, the product that Colombia has exported most in this sector is unroasted malt, germinated roasted grains and subjected to a process to dry them, which accounted for 20% of the total (DANE).

In second place are rum, brandy and other distillates, with a 17% share. Non-alcoholic beverages (excluding water and fruit juices) accounted for 15% and different types of water for 12%.

The outlook for the Colombian beverage industry is optimistic

According to The Food Tech portal, global demand for non-alcoholic beverages will increase by 19% between now and 2026. In Latin America, growth is estimated at 14%.

It is also projected that worldwide sales of alcoholic beverages will increase by 20% by 2025. Colombia could take advantage of this market expansion.

In particular, our country has a high export potential to Latin America due to the proximity of that market, in a business in which the weight of the products can increase freight costs and be an obstacle to competitiveness.

The beverage industry, excluding non-alcoholic beverages, is expected to grow in Colombia “at a solid pace during the forecast period (2023-2028) at a compound annual growth rate (CAGR) of 4.50%”, according to the market analysis made by the consulting firm Investigaciones de Expertos.

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